Phase generated carrier(PGC) method needs to be compensated when it is used in the actual demodulation system of optical fiber hydrophone.Parameter measurement error can induce an incomplete compensation effect on the arctangent demodulation model.Thus the arctangent algorithm based on the model produces distortion.The relative amplitude error(RAE) and harmonic suppression ratio(HSR) are considered in this paper,which indicate a linear distortion and a nonlinear one,respectively.The arctangent demodulation model with parameter estimation error is proposed.The quantitative relations between parameter measurement errors and demodulation distortions,such as RAE and HSR,are built up in theory.Finally,experimental results as well as simulations are presented to verify the proposed theory.