This paper develops a two country DSGE model to analyze monetary policy and the extensive margin of exports. Heterogeneity in productivity and the presence of fixed costs for entry and exporting give rise to an endogenous number of firms and endogenous tradability of goods. Output prices are set in consumers' local currency. A unilateral home monetary expansion makes home firms more competitive in international markets and the extensive margin of home exports expands. The shock is transmitted through an international production chain, and as it becomes more profitable for foreign firms to export, there is positive co-movement in extensive margins.