By comparing the open-loop condition and closed-loop condition, the accuracy of PSS parameter setting method using open-loop compensation principle is studied. Firstly, the PSS model which has one single electric power input signal is acquired by simplification. The influence of control parameters on amplitude-frequency characteristics and phase-frequency characteristics is studied by using open-loop compensation theory. Then the influence of parameter variation on critical gain and damping effect is studied under closed-loop condition by means of real power grid simulation. By comparing the open-loop condition and closed-loop condition results, it is found that the open-loop compensation theory cannot accurately analyze the PSS damping effect. The results show that the coordination of amplitude-frequency and phase-frequency characteristics is needed in PSS parameter setting. The simulation results show that the critical gain and damping effect is influenced by the parameters of the DC block link, and the critical gain is not affected by the maximum amplitude-frequency gain. Finally, some suggestions for improving parameter setting are given through comparative analysis, the achievements obtained in this paper can be used as a reference for the optimal configuration of PSS parameters. This work is supported by National Natural Science Foundation of China (No. 51777074 and No. 51307058), the Chinese Fundamental Research Funds for the Central Universities (No. 2018YQ03), and the Hebei Provincial Top Youth Talent Support Program (No. [2018]-27).