||Even under the regime of free mobility of goods the markets seem to be more segmented than is generally thought. This thesis focuses on the dampening effect of national borders on trade, which is accompanied by an extra dispersion of prices of similar goods between different countries. The evidence indicates that the presence of borders depresses the level of foreign trade as well as it enlarges the variation of prices across countries beyond of what can be explained by their physical distance and economic sizes. The comparison of intra- and international trade flows confirms that there is a missing trade between countries. This so-called border effect is evaluated by means of a gravity equation, in which trade flows between countries are positively affected their sizes and negatively by distance plus the presence of borders. In this paper the gravity model is employed for an empirical study of the border effect in the region of Central Europe over period 1993-2001. The results reveal that the intra-national trade exceeds the international trade about seven to ten times after separating the effects of size, distance and similar language.