It remains to be studied whether government guidance funds, as an innovative policy tool for the integration of finance and public finance, can promote the development of the digital economy. Based on provincial panel data for China from 2013 to 2022, we employ the entropy method to measure the level of digital economy development and to analyze the impact of government guidance funds on digital economy development. The results indicate that government guidance funds significantly promote digital economy development, with stronger effects in the eastern region and in areas with higher levels of economic development, fiscal decentralization, technological activity, and industrial support. Mechanism analysis reveals that government guidance funds advance digital economy development by fostering digital technology innovation, digital human capital, and the formation of digital physical capital. Further analysis shows that fiscal  resources amplify the promotional effect of government guidance funds on regional digital economies, digital industrialization, and industrial digitization, whereas financial fragility weakens this effect. These findings offer policy-relevant implications for better leveraging government guidance funds to promote the development of the digital economy.

government guidance fund, digital economy, digital technology innovation, digital human capital, digital physical capital